The social and environmental effect of investing are becoming just as important as the financial returns for many investors.
This new approach is ‘impact investing’ and involves a new, more ethical way of picking stocks or funds.
New research by Standard Life Investments found eight out of 10 investors rank how companies approach human rights, equality and eradicating poverty just as important as yield in values-based investing.
The study also showed that investors aged under 40 were more likely to consider values when investing.
Many see their investment choices to strong arm companies looking for capital into making a positive social and environmental contribution without sacrificing profits.
Matching ethics with community goals
Amanda Young, Head of Responsible Investment, Standard Life Investments, said: “The case for impact investing is strong. It represents a tangible way for socially and environmentally aware investors to deploy their capital in a manner that meets their environmental, social and financial goals.
“As we move forward we will no doubt see a wider range of investment vehicles, as well as more diverse impact targets. Measurement will also become increasingly sophisticated and standardised.
“Our research highlights that we expect demand for socially responsible, values-based investments to continue to grow, particularly among millennials. For asset managers and advisers that embrace impact investing and offer suitable products to cater for this market, the future looks bright.”
In the UK, Social Investment Tax Relief (SITR) is one way to match ethics with helping people and communities.
SITR is a government-backed investment offering generous tax breaks to individuals staking up to £1 million across several SITRs.
SITR projects
In return, the investor nets 30% relief on income tax paid – that’s £30,000 on income tax of £100,000 paid in the year.
Other benefits include capital gains tax deferments with disposal and hold-over reliefs.
The money must be invested for three-years to attract the maximum tax incentives.
The cash can go into the enterprise as equity or debt finance, subject to several rules about the relationship between the investor and the SITR enterprise.
Investments range from restoring a pier at Clevedon, near Bristol, to helping local sports clubs or funding the opening of community shops and pubs.
